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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35361  
Subject: Re: building a muni bond portfoli0 Date: 1/6/2007 2:03 PM
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I took a quick look at Vanguard brokerage's PA muni offerings—just the first hundred that showed up on the search by highest yield, A or higher. The good news is that there were 100 and then some. Most of the ones in the first 100 were in the 20-30 year range, with call provisions, many insured, with yields as high as 5% plus, though down around 3.75% once you get to 10-15 years maturity. I assume some of the bonds in the next set would be shorter maturities.

Vanguard's PA muni fund is a long bond fund, which means considerable interest rate risk. It's current yield is 3.75%.

Vanguard brokerage (you'd have enough money to get free brokerage fee and voyageur client commissions) has $50 commission for munis, up to a $50,000 bond ($5/1000 above that). So if you bought in $5000 lots, with average maturity of 10 years in a ladder, you're looking at losing about .1% point of yield per year on commmissions. I think the end result would be a somewhat lower yield than the fund, but without having interest rate risk worries (and whatever the Fed does in the next year, we are still in a historically low interest rate environment).

Of course, there's a lot more to consider in selecting individual bonds, even investment grade munis, than just putting money in a fund. But, at least from my cursory look at Vanguard, it looks like individual munis is a viable option.
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